SBA settles for cents on the dollar with CPA who bankrolled City Hall deals that enriched Daley’s son
Patrick Daley got more than $1.2 million from Joseph M. McInerney’s Cardinal Growth venture capital fund between 2002 and 2009, documents obtained by the Sun-Times show.
A venture capitalist who bankrolled City Hall deals that secretly benefited Patrick Daley while his father Richard M. Daley was mayor has agreed to a court settlement that will see him repay less than 13% of the $290,596 he owes the U.S. Small Business Administration.
After eight years of legal wrangling, the SBA has given up on trying to collect the money from Patrick Daley’s friend Joseph M. McInerney, whose firm Cardinal Growth was seized by the federal agency eight years ago.
Under a settlement approved by a federal judge in Chicago, McInerney agreed to repay $36,000 over the next three years, to cooperate in an ongoing investigation of Cardinal Growth and to give a sworn deposition if asked.
McInerney’s settlement with the SBA was approved by a federal judge on Sept. 25, three days after he attended Patrick Daley’s wedding.
The SBA had accused McInerney of failing to put up all of the money he promised as a condition of Cardinal Growth obtaining more than $51 million in loans from the federal agency.
Cardinal Growth struggled to repay what it borrowed and still owed $21.4 million when it was seized by the SBA eight years ago.
In agreeing to settle its claims against McInerney, the SBA cited his personal and financial problems since it seized the venture capital fund in June 2011 and began attempting to recover taxpayers’ money by liquidating its investments.
“One of the key reasons . . . to settle for less than the full amount owed was Mr. McInerney’s ability to pay, weighed against the costs of further litigation,” according to SBA spokeswoman Tiffani S. Clements.
Amid the SBA’s efforts to get McInerney to pay up, he filed for bankruptcy. The case is still pending.
Two banks foreclosed on his River Forest home, which was sold for $1.5 million. His marriage ended in divorce last year. And he has been evicted from an apartment in River Forest.
In his bankruptcy case, McInerney says he owes $59,750 to a development company owned by Patrick Daley. McInerney gave no explanation on why he owes Daley money.
McInerney, 56, a certified public accountant, couldn’t be reached, and the former mayor’s son didn’t respond to an email seeking comment.
Patrick Daley got more than $1.2 million from Cardinal Growth between 2002 and 2009, the Chicago Sun-Times previously has reported. He got $708,999 after Cardinal Growth sold Concourse Communications, a company that got a contract from the Daley administration to install wireless Internet service at O’Hare Airport and Midway Airport.
McInerney started Cardinal Growth in 1999 with Robert J. Bobb Jr., a former federal prosecutor.
The SBA certified Cardinal Growth as a so-called small business lender, which allowed the Chicago company to borrow $2 from the federal government for every dollar raised through private investors. Among their investors was Bruce Rauner, later elected governor of Illinois.
With the money from the federal government, Cardinal Growth invested in a few struggling companies across the United States, including a shrimp distributorship in Los Angeles, aiming to turn the companies around.
In 2003, McInerney and Bobb invested SBA money in Municipal Sewer Services, a Chicago company that had taken over contracts to clean and inspect sewers under the Daley administration. Municipal Sewer Services later was handed more than $4 million in no-bid contract extensions from City Hall.
Daley’s son and the mayor’s nephew Robert G. Vanecko had secretly invested $65,000 in the sewer company, the Sun-Times reported in 2007. As investors, their names should have been included in documents the company filed with City Hall, under city regulations, but they weren’t.
As City Hall was engulfed by the Hired Truck Scandal that ultimately led to four dozen convictions of city officials and clout-heavy insiders, Daley’s son and nephew left the sewer company in late 2005. But their ownership stake in the business remained hidden until the Sun-Times exposed it.
The disclosure embarrassed the mayor, who said he didn’t know his son and nephew had been part owners of the company until reporters asked about that.
Municipal Sewer Services is out of business. Its president, a former city employee named Anthony Duffy, pleaded guilty to lying to a federal agent. As part of his plea agreement, Duffy said McInerney told him he shouldn’t reveal on city documents that Patrick Daley and Vanecko had a stake in the sewer company.
The SBA has collected more than $6 million from Cardinal Growth’s investors, according to Clements — about 90 percent of the amount still owed.
Bobb, 72, settled with the SBA in January 2016. Bobb — who paid $1.5 million and also agreed to cooperate with the investigation — didn’t respond to messages regarding McInerney’s $36,000 settlement.